According to a research report by Bank of America (BAC) on Monday, Artificial intelligence (AI) technology has the potential to significantly enhance banks’ efficiency. The report was led by analysts Richard Thomas and highlights that greater automation is likely to be the first and greatest application of AI technology for banks.
The use of AI can improve bank productivity and thereby enhance bank returns. However, there are also vulnerabilities surrounding the broad use of AI in banks that must be addressed. The report notes that ongoing dialogue between the industry and regulators is necessary to ensure that banks and supervisors are comfortable with the risks associated with institutionalizing AI.
One concern raised in the report is the security of client assets in a world of democratized AI, which has reduced barriers to threat actors. The collapse of a number of U.S. banks earlier in the year was linked to deposit withdrawals, accelerated by technology and social media. It is “less obvious that regulators have a clear antidote to this new reality.”
Despite these concerns, most major banks are already using AI cautiously, and if it can deliver tangible efficiencies for European banks and boost returns, there will be recognition with more stable to higher credit ratings and secure spreads. However, Bank of America noted that the revenue upside from the use of AI technology at this stage is “less tangible.”